Credit card debt among retirees jumps significantly

The share of Americans with credit card debt in retirement has jumped considerably — a worrisome financial trend, especially for those with little wiggle room in their budgets, experts said.

About 68% of retirees had outstanding credit card debt in 2024, up “substantially” from 40% in 2022 and 43% in 2020, according to a new poll by the Employee Benefit Research Institute.

“It’s alarming for retirees living on a fixed income,” said Bridget Bearden, a research strategist at EBRI who analyzed the survey data.

Inflation is the “true driver” of retirees’ increased use of credit cards, Bearden said.

But it’s not just retirees.

About 2 in 5 cardholders have maxed out or nearly hit their card limit since early 2022, resulting from inflation and higher interest rates, according to a recent Bankrate poll.

U.S. consumer prices grew quickly in recent years, as they have around the world due largely to pandemic-era supply-and-demand shocks.

“If so much of your Social Security income is now going toward your rent, then you have few funds left over for other essential expenses,” thereby driving up credit card use, Bearden said.

Social Security beneficiaries get an annual cost of living adjustment meant to help recipients keep up with inflation. However, data suggests those adjustments don’t go far enough. To that point, Social Security recipients have lost about 20% of their buying power since 2010, according to the Senior Citizens League.

EBRI polled 3,661 retirees between the ages of 62 and 75 during summer 2024. About 83% were collecting Social Security benefits, with the typical person getting roughly half their income from Social Security.

Credits cards, which carry high interest rates, are an “expensive form of borrowing,” Federal Reserve Bank of St. Louis researchers wrote in a May 2024 analysis.

Credit cards have only become more expensive as interest rates have swelled to record highs.

Consumers paid a 23% average rate on their balances in August 2024, up from about 17% in 2019, according to Federal Reserve data.

Rates have risen as the U.S. Federal Reserve hiked interest rates to combat high inflation.

The average household with credit card debt was paying $106 a month in interest alone in November 2023, according to the Federal Reserve Bank of St. Louis.

Rising debt levels were a problem for older Americans even before pandemic-era inflation.

“American families just reaching retirement or those newly retired are more likely to have debt — and higher levels of debt — than past generations,” according to a separate EBRI study, published in August.

More and more families are having issues with debt during their working years, which then carries into and through retirement, the report said.

The typical family with a head of household age 75 and older had $1,700 of credit card debt in 2022, EBRI said in the August report. Those with a head of household age 65 to 74 had $3,500 of credit card debt, it said.

1. Reduce expenses

There are a few ways retirees can get their credit card debt under control, financial advisors said.

The first step “is to figure out why they had to go in debt in the first place,” said Carolyn McClanahan, a certified financial planner and founder of Life Planning Partners in Jacksonville, Florida. She’s also a member of CNBC’s Financial Advisor Council.

If a cardholder’s income isn’t enough to meet their basic spending, or if a big event such as a home repair or medical procedure required them to borrow money, the person should consider lifestyle changes to reduce future expenses, McClanahan said.

McClanahan made these recommendations for ways cardholders can cut spending:

• Make sure you don’t have useless subscriptions or apps;
• Do an energy audit on your home to find ways to cut your water, electric and/or gas bill;
• Cook more and eat out less, which is both healthier and less expensive.

Retirees may also choose to make a bigger lifestyle decision, including relocating to an area with a lower cost of living, said CFP Ted Jenkin, the founder of oXYGen Financial and a member of the CNBC Financial Advisor Council.

Meanwhile, any spending cuts should be applied to reducing credit card debt, McClanahan said. Consumers can use a debt repayment calculator to help set repayment goals, she said.

2. Boost income

Retirees can also consider going back to work at least part time to earn more income, McClanahan said.

But there might be some “low-hanging fruit” retirees are overlooking, advisors said.

For example, they may be able to sell valuable items accumulated over the years — such as furniture, jewelry and collectibles — perhaps via Facebook Marketplace, Craigslist or a garage sale, said Winnie Sun, the co-founder of Sun Group Wealth Partners, based in Irvine, California. She’s also a member of CNBC’s Financial Advisor Council.

Sometimes, retirees hold on to such items to pass them down to family members, but family would almost certainly prefer their elders are financially healthy and avoid living in debt, Sun said.

Consumers can contact a nonprofit credit counseling agency — such as American Consumer Credit Counseling or the National Foundation for Credit Counseling — for help, she said.

3. Reduce your interest rate

Cardholders can contact their credit card provider and ask if it would be possible to reduce their interest rate, Sun said.

They can also consider transferring their balance to a card offering a 0% interest rate promotion to help pay off their debt faster, Sun said.

Cardholders may also transfer their debt into a home equity line of credit, or HELOC, which generally carries lower interest rates, though it may take a month or so to establish with a lender, Sun said. She recommended working with a financial advisor to analyze whether this is a good move for you: A HELOC can pose problems, too, especially for consumers who continue to overspend.

Additionally, cardholders can determine if the taxes they’d pay on a retirement account withdrawal would cost less than their credit card interest rate, Jenkin said.

“It might make sense to let the tax tail wag the dog, pay the taxes, and then pay off your debt, especially if you are at a 20%-plus interest rate,” Jenkin said.